The Economist’s “Happy” Ignorance

The Economist is undoubtedly the smartest weekly newsmagazine in the English language. I always look forward to its quirky year-end double issue. With articles ranging from the evolution of the suit to the dangers of medieval warfare, I was not disappointed with this year’s. The cover story, however, was perhaps the most interesting. It investigated recent research into happiness and discovered, encouragingly, that after one reaches the age of roughly 46, people tend to get happier as they get older.

“The notion that money can’t buy happiness is popular, especially among Europeans who believe that growth-oriented free-market economies have got it wrong,” the authors explain. But according to the magazine’s reading of the data, “four main factors” determine happiness: “gender, personality, external circumstances and age.”

Some of the research, however, proves puzzling. “Hong Kong and Denmark, for instance, have similar income per person, at purchasing-power parity; but Hong Kong’s average life satisfaction is 5.5 on a 10-point scale, and Denmark’s is 8. … the ex-Soviet Union [is] spectacularly miserable, and the saddest place in the world, relative to its income per person, is Bulgaria.”

The authors would like to find an explanation in the national character of these places, because if they don’t, they would have to accept the obvious. Life is happier in Denmark than Singapore because it’s a much better place to live. And despite all those old jokes about (exaggerated) Scandanavian suicide rates, Danes are also happier than Americans, and the reasons are just about as good. Owing to The Economist’s apparently unshakeable commitment to laissez faire economics, though, the reader is left in the dark.

There’s no mention, for instance, that Denmark spends nearly one-third of its gross domestic product on government-run benefits and taxes its citizens at an equivalently high rate. In recent years, its top bracket has been well more than 60 percent, nearly double the highest rate in the United States. With these revenues, the state spends roughly 5 percent of its GDP on the unemployed and as much as 2 percent alone on “flexicurity” labor market programs to help retrain displaced workers.

This compares with a feeble 0.16 percent of such spending in the United States, which is by far the lowest in the Organization for Economic Co-operation and Development, or OECD. Partly as a result, Denmark’s unemployment rate is much lower than that of the United States. According to the Economist Intelligence Unit, Denmark’s “Quality of Life” index proved superior to that of America as well, with advantages like universal health care and day care, and an extremely low poverty rate that’s not even a quarter of that of the United States, which is one of the worst performers in this category according to OECD figures.

American journalists tend to treat inequality as a fact of life. But it needn’t be. For instance, in 2009, the average income of the top 5 percent rose. Everybody else’s fell, furthering a 40-year trend during which the share of total income going to the wealthiest 1 percent of Americans has risen from about 8 percent during the 1960s to more than 20 percent in 2011.

U.S. income inequality outpaces that of every other advanced industrial nation—nevermind Denmark. That puts us in the same category with miserable places like Turkmenistan. Authors Jacob Hacker and Paul Pierson point out that these changes have resulted from deliberate decision making in Congress, whose members’ elections are funded by the same wealthy folk enjoying all the benefits.

Since the late 1970s, they note, Congress has cut tax rates on the highest incomes over and over, together with capital gains and estate taxes. It has also made it more difficult for unions to organize and extract a fair share of the profit pie for workers. At the same time, Congress has loosened federal oversight and restrictions on banks and other financial players. It repealed the Glass-Steagall Act in 1999 to allow the creation of global megabanks like Citigroup and JP Morgan Chase that are “too big to fail” and hence too big to behave responsibly with their investors’ money.

In the 1990s, the Financial Accounting Standards Board, which regulates accounting practices, noticed this practice, correctly predicted the damage it would do to the economy, and then sought to curtail it. But Congress, spurred on by the lobbying efforts of major corporations, stopped the FASB in its tracks. As a result, Americans spent the 1990s and the first decade of this century living under 1970s accounting rules, which allowed top executives to more or less help themselves and, through the mutual back-scratching habits of corporate boards, help one another.

And yet like The Economist, almost every mainstream news source treated these developments as somehow organic to capitalism rather than specific choices made by the political system to favor its wealthy funders over the poor and middle class.

In his famous prison notebooks, discovered long after his death, Italian communist philosopher Antonio Gramsci identified, in the words of one of his interpreters, “an order in which a certain way of life and thought is dominant, in which one concept of reality is infused throughout society in all its institutional and private manifestations, informing with its spirit all taste, morality, customs, religious and political principles, and all social relations, particularly in their intellectual and moral connotations.”

Economists Simon Johnson and James Kwak identify just such an “order” in the United States beginning in the 1990s, when both parties benefited from massive investments in congressional war chests by investment bankers and their allies to build on the belief of what Ronald Reagan liked to call the “magic” of the marketplace. The new ideology of Wall Street, “that unfettered innovation and unregulated financial markets were good for America and the world,” soon became the consensus view in both the Democratic and Republican parties. As a result, lobbyists’ talking points became “self-evident.”

Perhaps that’s why The Economist does not wish to point out what’s obvious. The reasons are “self-evident.” Too bad they are also wrong. Just ask the happy Danes.

Eric Alterman is a Senior Fellow at the Center for American Progress and a Distinguished Professor of English at Brooklyn College.He is also a columnist for The Nation, Moment, andThe Daily Beast. His newest book isKabuki Democracy: The System vs. Barack Obama. Eric will be on a book tour in New York, Seattle, Portland, and San Francisco next week. Go here for the schedule.